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Posted By: ashish mishra Member Level: Bronze Posted Date: 02 May 2008
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2007 ICFAI University M.B.A Business Administration Financial Accounting - I (MB131) : January 2007 Question paper
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Question Paper
Financial Accounting - I (MB131): January 2007
· Answer all questions.
· Marks are indicated against each question.
1. The fund available with a company after paying all claims including tax and dividend is called
(a) Net profit
(b) Net operating profit
(c) Capital profit
(d) Retained earnings
(e) Profit before tax.
(1 mark)
2. If office equipment is purchased for cash, what effect will this transaction have on the financial position of the company?
(a) There is no change in the assets, liabilities and owners’ equity
(b) There is a decrease in assets, increase in liabilities and no change in owners' equity
(c) There is a decrease in assets, no change in liabilities and a decrease in owners' equity
(d) There is an increase in assets, decrease in liabilities and no change in owners’ equity
(e) There is an increase in assets, no change in liabilities and an increase in owners’ equity.
(1 mark)
3. Amortization of unidentified intangible assets is in recognition of
(a) Conservatism concept
(b) Going concern concept
(c) Matching concept
(d) Time period concept
(e) Business entity concept.
(1 mark)
4. According to Companies Act, 1956, assets are to be classified in the following order
(a) (i) Fixed assets (ii) Current assets, loans and advances (iii) Investments
(iv) Misc.expenditure
(b) (i) Fixed assets (ii) Investments (iii) Current assets, loans and advances
(iv) Misc.expenditure
(c) (i) Investments (ii) Fixed assets (iii) Current assets, loans and advances
(iv) Misc.expenditure
(d) (i) Current assts, loans and advances (ii) Investments (iii) Fixed assets
(iv) Misc.expenditure
(e) (i) Investments (ii) Current assets, loans and advances (iii) Fixed assets
(iv) Misc.expenditure.
(1 mark)
5. Which of the Accounting Standards issued by the Accounting Standard Board covers Accounting for the Effect of Changes in Foreign Exchange Rates?
(a) AS 1
(b) AS 4
(c) AS 5
(d) AS 11
(e) AS 12.
(1 mark)
6. Which of the following cost is not directly related to a specific contract?
(a) Site labor cost
(b) Cost of moving plant and equipment to and from a site
(c) Research and Development cost
(d) Supervision cost
(e) Materials used.
(1 mark)
7. Which of the following items is not a reason for difference between bank balance as per cash book and pass book?
(a) Omission of a contra entry in cash book
(b) Cheques deposited but not yet cleared
(c) Omission of an entry in cash column of cash book
(d) Cheques issued but not yet presented for payment
(e) Interest on investments directly collected by bank.
(1 mark)
8. Which of the following is a real account?
(a) Bank account
(b) Stock of stationery account
(c) Returns inward account
(d) Outstanding rent account
(e) Capital account.
(1 mark)
9. Issued cheque for Rs.10,000/- for goods purchased and received Rs.100/- as cash discount. In a cash book with cash, bank and discount column ,the above transaction is recorded by
(a) Entering Rs.10,000/- on the credit side of cash column and Rs.100/- on the credit side of discount column
(b) Entering Rs.10,000/- on the credit side of bank column and Rs.100/- on the credit side of discount column
(c) Entering Rs.10,000/- on the debit side of bank column and Rs.100/- on the debit side of discount column
(d) Entering Rs.10,000/- each on the debit side of bank column and credit side of cash column and Rs.100/- on the debit side of discount column
(e) Entering Rs.10,000/- each on the credit side of bank column and debit side of cash column and Rs.100/- on the credit side of discount column.
(1 mark)
10. Anil & Bros. borrowed Rs.1,00,000/- from Aggarwal & Co. and paid Rs.2,000/- as incidental charges. The journal entry passed in the book of Anil & Bros. is
Rs. Rs.
(a) Cash a/c Dr. 1,00,000
To Aggarwal & Co. 1,00,000
(b) Cash a/c Dr. 98,000
To Aggarwal & Co. 98,000
(c) Cash a/c Dr. 1,00,000
To Aggarwal & Co 98,000
To Incidental charges a/c 2,000
(d) Cash a/c Dr. 98,000
Incidental charges a/c Dr. 2,000
To Aggarwal & Co. 1,00,000
(e) Cash a/c Dr. 1,00,000
Incidental charges a/c Dr. 2,000
To Aggarwal & Co. 1,02,000.
(1 mark)
11. The total of debit side of the Trial balance of Gemini Co. is excess by Rs.4,247. The same was carried over to suspense account by a credit of Rs.4,247. The accounting treatment of the suspense account at the time of preparation of final accounts is to
(a) Credit as income in profit and loss account
(b) Debit as expense in profit and loss account
(c) Show under current liabilities in balance sheet
(d) Show under current assets in balance sheet
(e) Credit to capital account.
(1 mark)
12. Current liabilities of a business do not include
(a) Bank overdraft
(b) Sundry creditors
(c) Prepaid Insurance
(d) Unclaimed dividend
(e) Current installments of long term loan.
(1 mark)
13. Which of following transactions does not change the total amount of liabilities in the balance sheet?
(a) Purchase of office furniture on credit
(b) Payment of bank loan
(c) Issue of debentures
(d) Acceptance of bills from creditors
(e) Sale of furniture at book value on credit.
(1 mark)
14. The following item does not come under Miscellaneous Expenses in Balance-Sheet
(a) Preliminary Expenses
(b) Commission on underwriting of shares
(c) Discount on issue of debentures
(d) Goodwill
(e) Interest paid out of capital during construction.
(1 mark)
15. Accounting Standard –6 relating to depreciation of fixed asset is not applicable to
(a) Building
(b) Plant & Machinery
(c) Plantations
(d) Patent
(e) Equipments.
(1 mark)
16. Which of the following systems of inventory valuation computes cost of goods sold as a residual amount?
(a) Weighted Average
(b) Last-in First-out
(c) Perpetual Inventory System
(d) Periodic Inventory System
(e) Specific Identification.
(1 mark)
17. If physical stock is taken a few days later than the accounting year-ends, certain adjustments are required to arrive at the actual value of stock on the closing date. Which of the following adjustments is false?
(a) Add sales between the two dates
(b) Add goods purchased before the year end but still in transit
(c) Add purchase between the two dates
(d) Less sales return between the two dates
(e) Less any goods held in stock but title of such stock has been transferred to the buyer.
(1 mark)
18. Which of the following methods of valuation of inventory is based on the assumption that costs are charged against revenue in the order in which they occur?
(a) FIFO method
(b) LIFO method
(c) Weighted average method
(d) Moving average method
(e) Base stock method.
(1 mark)
19. An exporter had the following transactions with his consignee in U.S.A. On 28.2.2006 goods costing Rs.2 lakhs were sent. The goods were received by the consignee on 5.3.2006. The consignee sold 50% of the consignment for Rs.1,20,000 on 28.3.2006 and the balance also for Rs.1,20,000 on 4.4.2006. How much revenue can be treated as being realized as on 31.3.2006?
(a) Rs.1,00,000
(b) Rs.1,20,000
(c) Rs.2,20,000
(d) Rs.2,00,000
(e) Rs.2,40,000.
(2 marks)
20. When a fixed asset is acquired in exchange of another asset its cost is usually determined by reference to the
(a) Net book value of the asset given up
(b) Gross book value of the asset given up
(c) Net book value of the asset acquired
(d) Gross book value of the asset acquired
(e) Realizable value of the asset given up.
(1 mark)
21. If unexpired insurance appears in the trial balance, it should be
(a) Debited to the trading account
(b) Credited to the profit and loss account
(c) Debited to the profit and loss account
(d) Shown on the liabilities side of the balance sheet
(e) Shown on the assets side of the balance sheet.
(1 mark)
22. Which of the following concepts is not considered as basic principle of accounting?
(a) Materiality concept
(b) Cost concept
(c) Consistency concept
(d) Matching concept
(e) Logical concept.
(1 mark)
23. Deferred tax assets/liabilities arise because of
(a) Temporary differences between income before taxes in the financial statements and taxable income per the tax
(b) Permanent differences between income before taxes on the financial statements and taxable income per the tax
(c) Delays between incurring the tax liability and actually paying the tax authorities
(d) Time between when the tax liability is determined and when the cash is paid
(e) Time differences between the pronouncement of the tax laws and their implementation.
(1 mark)
24. Capital employed is equal to
(a) Gross fixed assets + Current assets
(b) Gross fixed assets – Depreciation + Current assets
(c) Gross fixed assets + Current assets – Current liabilities
(d) Gross fixed assets – Depreciation + Current assets – Current liabilities
(e) Current assets – Current liabilities.
(1 mark)
25. Which of the following factors is used as a multiplier of super profits in valuation of goodwill of a business?
(a) Average capital employed in the business
(b) Simple profits
(c) Number of years’ purchase
(d) Normal rate of return
(e) Normal profits.
(1 mark)
26. Which of the following factors does not have lasting impact on the evaluation of goodwill?
(a) Normal rate of return
(b) Capital employed
(c) Nature of business
(d) Temporary craze or fashion
(e) Personal skill and reputation of the owner.
(1 mark)
27. Share premium cannot be used to
(a) Issue bonus shares
(b) Redeem preference shares
(c) Write-off preliminary expenses
(d) Write-off discount on issue of shares
(e) Provide for premium payable on redemption of debentures.
(1 mark)
28. For valuation of an equity share under the yield method, information is required regarding
I. Net assets of the business.
II. Number of equity shares.
III. Normal rate of return.
IV. Face value of the share.
V. Paid-up value of the share.
(a) Both (I) and (II) above
(b) Both (III) and (IV) above
(c) Both (III) and (V) above
(d) (I), (III) and (IV) above
(e) (II), (III) and (IV) above.
(1 mark)
29. Premium on redemption of debentures account is
(a) A real account
(b) A nominal account
(c) A personal account
(d) An asset
(e) A capital reserve.
(1 mark)
30. Which of the following statements is false?
(a) A company can redeem its preference shares
(b) Preference shareholders are creditors of a company
(c) The part of the authorized capital which can be called up only in the event of liquidation of a company is called reserve capital
(d) Capital redemption reserve can be utilized for issuing fully paid bonus shares
(e) Profit on reissue of forfeited shares is transferred to capital reserve account.
(1 mark)
31. Firm underwriting is
(a) When the underwriter agrees to take up an agreed portion of shares not taken up by the public
(b) When the underwriter agrees to underwrite the whole issue
(c) When the underwriter agrees to underwrite only a part of the whole issue
(d) When the underwriter agrees to take up a specific number of shares irrespective of the results of the public response to the issue
(e) When an underwriting firm agrees to underwrite the shares.
(1 mark)
32. The ex-interest purchase price of own debentures of EXLNT Ltd. is less than their face value. The said debentures are cancelled by the company. The transaction involves
(a) A capital profit and is transferred to capital reserve account
(b) A capital loss and is transferred to share premium account
(c) A revenue profit and is transferred to profit and loss account
(d) A revenue loss and is transferred to profit and loss account
(e) A capital profit and is transferred to profit and loss appropriation account.
(1 mark)
33. Which of the following is a leverage ratio?
(a) Debt-Equity ratio
(b) Current ratio
(c) Quick ratio
(d) Earning power
(e) Inventory turnover ratio.
(1 mark)
34. For the purpose of calculating basic earnings per share, the number of shares to be considered is
(a) Average number of equity shares outstanding during the period
(b) Weighted Average number of equity shares outstanding during the period
(c) Number of equity shares outstanding at the beginning of the period
(d) Number of equity shares outstanding at the close of the period
(e) Number of equity and preference shares outstanding during the period.
(1 mark)
35. Unless otherwise stated, preference share is always deemed to be
(a) Cumulative, participating and non-convertible
(b) Non-cumulative, non-participating and non-convertible
(c) Cumulative, non-participating and non-convertible
(d) Non-cumulative, participating and non-convertible
(e) Cumulative, participating and convertible.
(1 mark)
36. Which of the following is true with regard to 10% Debentures issued at a discount of 20%?
(a) The carrying amount of debentures gets larger each year
(b) The interest on debentures gets smaller each year
(c) Issue price and the carrying amount are equal
(d) At the time of redemption, the debenture holder will be paid the issue price
(e) The face value and the carrying amount are equal.
(1 mark)
37. An increase in the number of shares outstanding with a corresponding decrease in par value per share is known as
(a) Issue of Rights shares
(b) Issue of Bonus shares
(c) Issue of fresh shares
(d) Redemption of shares
(e) Share split.
(1 mark)
38. Which of the following is to be deducted from the assets, while valuing the equity shares under intrinsic value method?
(a) Preference share capital
(b) Dividend equalization reserve
(c) Contingency reserve
(d) Debenture redemption fund
(e) Capital redemption reserve.
(1 mark)
39. Till the date of redemption of debentures, ‘Premium on Redemption of Debentures’ appears on the
(a) Liabilities side of Balance Sheet
(b) Assets side of Balance Sheet
(c) Credit side of Profit and Loss Account
(d) Credit side of Profit and Loss Appropriation Account
(e) Credit side of Profit and Loss Adjustment Account.
(1 mark)
40. The two basic sources of capital in a company are
(a) Paid-up capital and retained earnings
(b) Dividends and assets
(c) Paid-up capital and dividends
(d) Dividends and retained earnings
(e) Paid-up capital and assets.
(1 mark)
41. Consider the following data pertaining to Windsor Ltd. for the month of December 2006:
Particulars As on December 01, 2006 (Rs.) As on December 31, 2006 (Rs.)
Stock 1,80,000 90,000
Sundry Creditors 80,000 60,000
The company makes all purchases on credit. During the month of December 2006, the company paid a sum of Rs.3,50,000 to the suppliers. The goods are sold at 25% above the cost. The sales for the month of December 2006 were
(a) Rs.4,12,500
(b) Rs.5,25,000
(c) Rs. 90,000
(d) Rs.3,15,000
(e) Rs.3,30,000.
(2 marks)
42. Mr. Sharma, an employee had been paid conveyance of Rs.350. It was wrongly credited to his account. The rectification entry will be
Rs. Rs.
(a) Mr. Sharma’s a/c Dr. 350
To Conveyance a/c 350
(b) Mr.Sharma’s a/c Dr. 350
To Misc. Expenses a/c 350
(c) Conveyance a/c Dr. 350
To Mr. Sharma’s a/c 350
(d) Conveyance a/c Dr. 350
To Cash a/c 350
(e) Conveyance a/c Dr. 350
Sharma a/c Dr. 350
To Suspense a/c 700.
(1 mark)
43. The accountant of M/s.ABC Ltd. prepared the provisional profit and loss account for the year ended March 2006 and submitted to the manager for verification. The accountant reported a profit of Rs.6,50,000. On scrutiny, the following omissions and commissions are noticed:
• Building rent of Rs.1,500 per month was paid upto January 2006. Rent debited to Profit and loss account is Rs.15,000.
• Sales book is overcast by Rs.20,000.
• Rs.20,000 paid for the repair of second hand machinery purchased, to bring it to the working condition, is debited to Repairs and Maintenance as Rs.2,000.
The above mistakes were duly rectified. The profit made by the company after the rectification is
(a) Rs.6,29,000
(b) Rs.6,49,000
(c) Rs.6,32,000
(d) Rs.6,25,000
(e) Rs.6,47,000.
(2 marks)
44. The following is the summarized profit and loss account of Sandookwala Ltd. for the year ended 31st March 2006.
Particulars Rs. crores
Sales 400
Depreciation 20
Other Expenses 320
Net profit 60
All depreciation is charged at 25% written down value method. In the year 2006-07 no fixed assets will be sold and no new fixed assets will be bought. Depreciation will be charged at the same rate and by the same method. Sales will be 10% higher than the current year sales. Whereas other expenses will increase by 20%. The net profit for the year 2006-07 will be
(a) Rs.56 crores
(b) Rs.51 crores
(c) Rs.41 crores
(d) Rs.36 crores
(e) Rs.31 crores.
(2 marks)
45. The books of Sahara Ltd. revealed the following information:
Particulars Rs.
Opening inventory 6,00,000
Purchases during the year 2005-2006 34,00,000
Sales during the year 2005-2006 48,00,000
On March 31, 2006, the value of inventory as per physical stock-taking was Rs.3,25,000. The company’s gross profit on sales has remained constant at 25%. The management of the company suspects that some inventory might have been pilfered by a new employee. What is the estimated cost of missing inventory?
(a) Rs. 75,000
(b) Rs. 25,000
(c) Rs.1,00,000
(d) Rs.1,50,000
(e) Rs.2,25,000.
(2 marks)
46. A firm has a long standing arrangement for supply of consumer durables to the employees in a public sector undertaking on installment credit basis free of interest. The price is to be paid in 24 equal monthly installments. From October to March of the accounting year the firm sold goods valued Rs.5 lakhs to the employees out of which Rs.1 lakh was received as installments. If very few employees have defaulted the installments, how much of the amount sold can be taken as revenue realized?
(a) Rs.1,00,000
(b) Rs.5,00,000
(c) Rs.2,50,000
(d) Rs.1,25,000
(e) Rs. 80,000.
(2 marks)
47. A machine was acquired by a company five years ago at a price of Rs.13,000. It is being depreciated to its scrap value Rs.1000/- on straight line basis over 8 years. The amount of depreciation accumulated upto date is Rs.7,500. The company reestimates the life of the machine in a more realistic manner and indicates its life span for 10 years. The total amount of depreciation adjustment for the past five years amounts to
(a) Rs. 300
(b) Rs. 600
(c) Rs. 900
(d) Rs.1,200
(e) Rs.1,500.
(2 marks)
48. A new machine costing Rs.1 lakh was purchased by a company to manufacture a special product. Its useful life is estimated to be 5 years and scrap value at Rs.10,000. The production plan for the next 5 years using the above machine is as follows:
Year 1 5,000 units
Year 2 10,000 units
Year 3 12,000 units
Year 4 20,000 units
Year 5 25,000 units
The depreciation expenditure for the 3rd year under units-of-production method will be
(a) Rs.16,667
(b) Rs.15,000
(c) Rs.20,000
(d) Rs.18,000
(e) Rs.19,000.
(2 marks)
49. During the year 2005-06, Fiza Ltd. reported a profit of Rs.4,20,000 after paying tax at the rate of 50%. This profit includes an income of Rs.45,000 being a claim lodged in the month of January 2005 for which no entry was passed in the year 2004-05. The company expects to introduce a new product in the year 2006-2007. The introduction of the new product leads to an increase of expenses by Rs.50,000. The estimates of new product are as under:
Sales Rs.5,00,000
Direct expenses (including material and wages) Rs.2,25,000
The future maintainable post-tax profits of the company are
(a) Rs.4,47,500
(b) Rs.5,10,000
(c) Rs.4,75,000
(d) Rs.2,60,000
(e) Rs.4,70,000.
(2 marks)
50. Consider the following data pertaining to M/s.Super Bright Ltd.:
Year Pre-tax profits
(Rs.) Return on capital employed
(%)
2002-2003 5,60,000 10.0
2003-2004 6,50,000 12.5
2004-2005 7,00,000 17.0
2005-2006 6,90,000 20.5
If the tax rate is 40%, the total value of the business considering the above data is
(a) Rs. 6,50,000
(b) Rs.26,00,000
(c) Rs. 3,90,000
(d) Rs.43,33,333
(e) Rs. 97,500.
(2 marks)
51. The following particulars are available in respect of the business carried on by Words Worth Ltd.
(i) Profits earned by Words Worth Ltd.:
Year Profit
2003-2004 Rs.50,000
2004-2005 Rs.48,000
2005-2006 Rs.52,000
(ii) Profit of 2004-2005 is reduced by Rs.5,000 due to stock destroyed by fire and profits of 2003-2004 included a non-recurring income of Rs.3,000.
(iii) Profits of 2005-2006 include Rs.2,000 income on investments.
(iv) The stock is not insured and it is thought prudent to insure the stock in future. The insurance premium is estimated at Rs.500 per annum.
Fair remuneration to the manager (who is going to be appointed) (not taken in the calculation of profits) is Rs.10,000 per annum.
The value of goodwill on the basis of 2 years’ purchase of average profits of the last three years is
(a) Rs. 79,000
(b) Rs.1,00,000
(c) Rs. 77,000
(d) Rs.1,21,000
(e) Rs. 99,000.
(2 marks)
52. Consider the following data pertaining to Bond Bros.
i. Average profits of the last four years Rs.1,21,500
ii. Remuneration from alternative employment of the partners Rs. 21,500
iii. Capital employed Rs.6,00,000
If fair rate of return in similar business is 12%, the value of goodwill on the basis of 3 years purchase of super profits of the business, is
(a) Rs.1,21,500
(b) Rs.1,00,000
(c) Rs. 84,000
(d) Rs. 72,000
(e) Rs. 28,000.
(2 marks)
53. The following information is extracted from the books of Jeet and Company:
• Capital employed - Rs.1,00,000.
• Normal rate of return is -10%.
• Present value of annuity of Re.1 for five years at the rate of 10% – 3.78.
• Net profits for five years:
Year Rs.
1 Rs.14,400
2 Rs.15,400
3 Rs.16,900
4 Rs.17,400
5 Rs.17,900
The profits included non-recurring profits on an average basis of Rs.1,000 and even recurring profits had a tendency of appearing at Rs.600 per annum.
The value of goodwill under annuity method is
(a) Rs.37,800
(b) Rs. 6,000
(c) Rs.22,680
(d) Rs.60,480
(e) Rs.59,724.
(2 marks)
54. If the yield rate of return of Expert Ltd. is 15.75%, normal rate of return is 9%, paid up value is Rs.10 and nominal value of its equity share is Rs.20, the value of an equity share of Expert Ltd. is
(a) Rs.20.00
(b) Rs.17.50
(c) Rs.15.75
(d) Rs.14.18
(e) Rs.12.00.
(2 marks)
55. Kanishk Ltd. issued 1,50,000 equity shares of Rs.10 each at a premium of Rs.2 payable as under:
On application Rs.2
On allotment (including premium) Rs.5
On first call Rs.3
On final call Rs.2
Sudha, who applied for 1,000 shares, was allotted 600 shares. She failed to pay the amount due on first call and final call. The shares allotted to her were forfeited. Out of the forfeited shares, 300 shares were re-issued to Mr.Tarun at Rs.9 per share. The balance in the share forfeiture account is
(a) Rs.1,500
(b) Rs.1,200
(c) Zero
(d) Rs.3,000
(e) Rs.4,200.
(2 marks)
56. Consider the following information pertaining to issue of shares of a company. The company issued shares of Rs.10 each at a premium of Rs.2 payable as:
On application –– Rs.3
On allotment –– Rs.4 (including premium)
On first call –– Rs.3
On second and final call –– Rs.2
Mr. Deepak who holds 100 shares failed to pay first call money. The company has forfeited the 100 shares after first call. On forfeiture, the amount debited to share capital account is
(a) Rs.1,200
(b) Rs.1,000
(c) Rs. 800
(d) Rs. 700
(e) Rs. 500.
(2 marks)
57. Gautam Ltd. issued 5,000, 8% preference shares of Rs.100 each at a discount of 10%, which are redeemable at par. The amount of reserves available which can be used for redemption is Rs.2,00,000. For the purpose of redemption, it was decided to issue equity shares of Rs.10 each at a premium of 10%. The number of shares to be issued for redemption of preference shares is
(a) 30,000 shares
(b) 27,273 shares
(c) 50,000 shares
(d) 45,455 shares
(e) 20,000 shares.
(2 marks)
58. The Balance Sheet of Marvel Ltd. as on March 31, 2006 is as under:
Liabilities Rs. Assets Rs.
Equity share capital 6,00,000 Land and building 4,70,000
Reserves and surplus 2,10,000 Plant and machinery 2,50,000
12% Debentures 1,50,000 Furniture and fixtures 2,00,000
Sundry creditors 72,500 Sundry debtors 90,000
Bank overdraft 32,500 Inventories 65,000
Provision for taxation 45,000 Cash 35,000
11,10,000 11,10,000
The following assets are revalued as under:
Land and building Rs.5,00,000
Plant and machinery Rs.2,00,000
Sundry debtors Rs. 85,000
The profit of the company for the year ended March 31, 2006 was Rs.1,15,500. The company charges depreciation on all its fixed assets at the rate of 10% per annum. The depreciation adjustment on the revalued assets should be made for one year. The return on capital employed to equity shareholders was
(a) 14.33%
(b) 12.89%
(c) 13.12%
(d) 10.85%
(e) 14.15%.
(2 marks)
59. Viran Ltd. purchased Machinery from Indraja Company for a book value of Rs.4,00,000. The consideration was paid by issue of 10% debentures of Rs.100 each at a discount of 20%. The debenture account is credited with
(a) Rs.4,00,000
(b) Rs.5,00,000
(c) Rs.3,20,000
(d) Rs.4,80,000
(e) Debentures cannot be issued otherwise than for cash.
(1 mark)
60. On March 31, 2006, the balance of 12% Debentures of Rs.100 each of Mars Ltd. was Rs.5,00,000. The company reserves the right to redeem the debentures in any year by purchase in the open market. Interest on debentures is payable on September 30 and March 31, every year. On July 1, 2006, the company purchased 1,000 of its 12% Debentures as investment at Rs.99 cum-interest. On August 01, 2006, it purchased another 1,000 of its debentures at Rs.98 ex-interest. The company cancelled 2,000 own debentures on September 01, 2006. The profit/loss on cancellation of own debentures is
(a) Rs.1,000 (Loss)
(b) Rs.6,000 (Profit)
(c) Rs.3,000 (Profit)
(d) Rs.2,000 (Loss)
(e) No profit / No loss.
(2 marks)
61. Progress Ltd. issued 2,000 equity shares of Rs.10 each at par payable as under:
On application Rs.3
On allotment Rs.4
On first and final call Rs.3
Applications were received for 2,500 shares and allotment was made on pro-rata basis. Allotment money was received from all the shareholders except from Mr. Jagir, who was allotted 500 shares. The amount received on allotment is
(a) Rs.6,000
(b) Rs.4,875
(c) Rs.4,500
(d) Rs.6,500
(e) Rs.1,625.
(2 marks)
62. During the year 2001-2002, Santosh Ltd. issued 20,000, 12% Preference shares of Rs.10 each at a premium of 5%, which are redeemable after 4 years at par. During the year 2005-2006, as the company did not have sufficient cash resources to redeem the preference shares, it issued 10,000, 14% debentures of Rs.10 each at a premium of 10%. At the time of redemption of 12% preference shares, the amount to be transferred to capital redemption reserve is
(a) Rs. 90,000
(b) Rs.1,00,000
(c) Rs.2,00,000
(d) Rs.1,10,000
(e) Rs.2,10,000.
(2 marks)
63. Consider the following data pertaining to XLNT Ltd. as on April 1, 2005:
Particulars Rs.
12% Debentures 50,000
Debenture sinking fund 40,000
Debenture sinking fund investment (represented by 18%, Rs.46,000 secured bonds). 40,000
The company sold the investments at 80% on March 31, 2006 and the debentures were paid off. The loss incurred on account of sinking fund investment account is
(a) Rs.6,000
(b) Rs.4,000
(c) Rs.3,700
(d) Rs.3,200
(e) Rs.2,300.
(2 marks)
64. Animesh Ltd. with an authorized capital of Rs.10,00,000 offered to public 50,000 equity shares of Rs.10 each payable as to Rs.2 with application, Rs.2 on allotment and the balance in three equal calls of Rs.2 each. The company received applications for 40,000 shares only. All the applications were accepted. One shareholder holding 800 shares did not pay the first call. After completing the legal formalities, the Board of Directors forfeited these shares. Consequently the second call was made on 79,200 shares only which was duly received in full. Then the Board of Directors reissued three-fourths of the forfeited shares as Rs.8 paid up @ Rs.7 per share. The final call was made after the reissue and the total money due was received before the last date fixed for payment of this call.
The amount outstanding to the credit of forfeited shares account is
(a) Rs.4,800
(b) Rs.2,400
(c) Rs. 800
(d) Rs.2,600
(e) Nil.
(2 marks)
65. On December 30, 2006, Supreme Company had 7,00,000 shares of common stock, 3,00,000 of which had been issued on October 1, 2006. The company declared a 2 for 1 stock split on December 31, 2006. The weighted number of shares outstanding for calculation of EPS would be
(a) 10,00,000 shares
(b) 8,50,000 shares
(c) 1,40,000 shares
(d) 9,50,000 shares
(e) 8,00,000 shares.
(2 marks)
66. Swiss Ltd has issued 40,000 equity shares of Rs.100 at a premium of 30%. Alok, an underwriter has underwritten 24,000 shares with a firm underwriting of 3,200 shares. The marked applications were for 7,200 shares. After adjusting credit for unmarked applications and the share in surplus of the co-underwriters, the net liability of Alok was determined to be 13,600 shares. The underwriting commission payable to Alok under maximum clause is
(a) Rs.1,20,000
(b) Rs. 88,400
(c) Rs. 84,000
(d) Rs.1,56,000
(e) Rs.1,35,200.
(2 marks)
67. M/s. Highfi Ltd. issued 10,000 equity shares of Rs.10 each, out of which only Rs.8 is called-up and paid-up. As the company has accumulated free reserves, it declared a bonus issue. This bonus issue is made by converting the partly paid shares into fully paid-up and by issue of one share for every four shares held by the existing shareholders.
The total amount required for bonus issue is
(a) Rs. 25,000
(b) Rs. 20,000
(c) Rs. 45,000
(d) Rs. 5,000
(e) Rs.1,25,000.
(2 marks)
68. As on December 30, 2006, the overdraft balance of Mr.Y as per bank passbook is Rs.30,000. The passbook balance did not agree with the balance as per cashbook. On scrutiny, the following omissions and commissions were noticed:
• A cheque for Rs.6,000 issued to Mr.Z has not been presented for payment till date.
• Mr.M, a tenant, directly deposited into the bank account of Mr.Y an amount of Rs.20,000 towards rent and the same is not accounted in the cashbook.
• A cheque for Rs.5,000 deposited in the bank is not yet realized till date.
• The interest on debentures for this year, directly collected by the bank, amounted to Rs.15,000.
The bank balance as per cashbook is
(a) Debit balance of Rs.26,000
(b) Credit balance of Rs.66,000
(c) Credit balance of Rs.36,000
(d) Debit balance of Rs.71,000
(e) Debit balance of Rs.66,000.
(2 marks)
69. Consider the following data pertaining to Sarovar & Co. for the year ended March 31, 2006:
Particulars Rs.
Sales 5,50,000
Purchases 4,50,000
Opening stock 40,000
Salaries and wages 22,000
Printing and stationery 3,000
Rent paid 12,000
Prepaid insurance 4,000
Carriage inward 3,700
Carriage outward 2,500
Returns inward 20,000
Returns outward 15,000
Closing stock 20,000
The Manager of the business is entitled to a commission of 6% on profit after charging his commission. The commission payable to the manager for the year 2005-2006 was
(a) Rs.1,800
(b) Rs.1,668
(c) Rs.2,366
(d) Rs.1,908
(e) Rs.1,574.
(2 marks)
70. Silver Coats Ltd. invited applications for 1,00,000 equity shares of Rs.10 each at a premium of Rs.2 per share. The entire issue was underwritten by three underwriters in the following percentages:
Anil 30%
Vimal 40%
Sunil 30%
The details of marked and unmarked applications received are:
Marked applications
Anil 22,000 shares
Vimal 24,000 shares
Sunil 28,000 shares
Unmarked applications 16,000 shares
The final liability of Vimal in terms of number of shares is
(a) Nil
(b) 9,600
(c) 3,200
(d) 16,000
(e) 8,000.
(2 marks)
71. Provision for bad debts is made as per the
(a) Conservatism concept
(b) Cost concept
(c) Consistency concept
(d) Going concern concept
(e) Time period concept.
(1 mark)
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